Admission of a Partner: Capital Adjustment
CAPITAL ADJUSTMENT: ADMISSION OF A PARTNER At the time of admission of a partner, it may be agreed between the partners that the capitals of the partners may be adjusted as per agreement. The adjustment may take any of the following forms: Case l. Determination of Capital of New Partner on the basis of Old Partners' Capital. Case 2. Adjustment of old Partners' capital on the basis of New Partner's capital. Case 3. Total capital of Reconstituted Firm is given which is to be adjusted in New Ratio. Case 1: Determination of Capital of New Partner on the basis of old partners’ capital Sometimes, at the time of admission, the capital of the new partner is not given and expected to bring capital on the basis of capitals of old partners. There can be net) situations: IA. When the New Partner is required to bring Proportionate Capital. (In this case, Capital of Firm is calculated on the basis of total adjusted capital of old partners), 1B. When the New Partner has to ...
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